The implied volatility of ATM contracts for 1M-3M tenors of EURUSD is flashing at around 12.45, that would be the post effects of UK  referendum period.

The risk reversals of this pair of the same duration are flashing hedging arrangements for downside risks.

Rationale: EUR/USD has been stuck in its range A period of relatively calm central bank activity should push FX volatility down in H2.

Both the ECB and BoJ face strong internal resistance to deeper rate cuts, not least from banks and insurance companies. On its side, the Fed will not want to upset the apple cart.

FX volatility, of course, is unlikely to fall before the UK referendum, and if the UK decides to stay in the EU, we will recommend selling FX volatility.

The Execution: Buy EUR/USD 6m double no touch, knock-out 1.05-1.16; Indicative offer: 12.5% (spot ref: 1.12)

As the realised volatility is likely to continue falling and implied should follow in the coming months.

6m EUR/USD double no-touch option is short vega, and with the spot not being in the middle of the range but close to one of the knock-out barriers, it currently offers a significant 8x leverage.

Risks profile: Risks are limited to the extent of premium paid, the investors buying a double no-touch option cannot lose more than the premium initially invested.

However, it will be knocked out if EUR/USD hits 1.05 or 1.16 at any time before the 6m expiry.